Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☐ (Do not check if a smaller reporting company)

Smaller reporting company ☑

Emerging growth company ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☑

State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: July 31, 2017: 166,795,807 shares of common stock, par value $0.001

Petrogress, Inc.

Form 10-Q for the Quarter ended June 30, 2017

Table of Contents

PART I. FINANCIAL INFORMATION

Page

Item 1.

Financial Statements

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

Item 4.

Controls and Procedures

20

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

21

Item 1A.

Risk Factors

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

21

Item 3.

Defaults Upon Senior Securities

21

Item 4.

Mine Safety Disclosure

21

Item 5.

Other Information

21

Item 6.

Exhibits

21

SIGNATURES

22

Part I - Financial Information Item 1 - Financial Statements

Petrogress, Inc. and Subsidiaries

Consolidated Balance Sheets

June 30, 2017 and December 31, 2016

(Unaudited)

(Audited)

June 30,

2017

December 31,

2016

ASSETS

Current Assets

Cash and cash equivalents

$

831,211

$

362,083

Accounts receivable

4,405,423

2,427,668

Prepaid expenses and other current assets

580,904

1,058,088

Marketable securities

20,940

20,940

Total Current Assets

5,838,477

3,868,779

Property and Equipment, net

5,770,067

5,919,067

Other Assets

8,775

8,775

Security deposit

Total Assets

$

11,617,319

$

9,796,621

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities

Accounts payable and accrued expenses

$

511,467

$

148,269

Due to related party

371,545

371,545

Convertible promissory notes

—

44,887

Derivative liability related to convertible promissory notes

—

65,499

Total Current Liabilities

883,012

493,255

Commitments and Contingencies

Stockholders' Equity (Deficit)

Preferred stock: $0.001 par value 10,000,000 shares authorized

Series A - $100 predesignated par value

100 shares designated, None issued and outstanding

Common stock: $0.001 par value

490,000,000 shares authorized, 166,795,807 issued and outstanding

166,796

166,796

Additional paid-in capital

8,423,641

8,423,641

Accumulated comprehensive income

15,660

15,660

Retained earnings

2,128,210

697,269

Total Stockholders' Equity

10,734,307

9,303,366

Total Liabilities and Stockholders’ Equity

$

11,617,319

$

9,796,621

3

Petrogress, Inc. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

Six and Three months ended June 30, 2017 and 2016

(Unaudited)

Six

months

ended

June 30,

2017

Six

months

ended

June 30,

2016

Three

months

ended

June 30,

2017

Three

months

ended

June 30,

2016

Revenues

$

8,462,185

$

11,146,672

$

4,443,072

$

5,327,888

Cost of Sales

4,088,856

7,937,172

1,814,271

3,730,637

Gross Profit

4,373,329

3,209,500

2,628,801

1,597,251

Operating expenses

Operating costs

1,815,100

1,607,853

879,600

795,778

General and administrative costs

845,618

482,749

461,897

268,549

Depreciation and amortization

348,930

334,877

175,362

169,002

Total operating expenses

3,009,648

2,425,479

1,516,859

1,233,329

Income from operations

1,363,681

784,021

1,111,942

363,922

Other income (expense)

Interest expense on notes payable

—

(19,860

)

—

(9,930

)

Gain on foreign currency exchange

2,263

—

1,158

—

Change in fair market value of derivative

Liabilities

65,499

99,746

65,499

99,746

Total other income (expense)

67,762

79,886

66,657

89,816

Income before provision for income

Taxes

1,431,443

863,907

1,178,599

453,738

Provision for income taxes

—

(34,700

)

—

(16,700

)

Net Income

1,431,443

829,207

1,178,599

437,038

Other comprehensive income (loss)

Change in fair value for available for sale

Marketable securities

—

(1,860

)

—

1,560

Comprehensive Income

$

1,431,443

$

827,347

$

1,178,599

$

438,598

Income per weighted-average share of common stock outstanding computed on net income-basic and fully diluted

$

(0.00

)

$

(0.00

)

$

(0.00

)

$

(0.00

)

Weighted-average number of shares of common stock outstanding-basic and fully diluted

166,795,807

166,795,807

166,795,807

166,795,807

4

Petrogress, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Six months ended June 30, 2017 and 2016

(Unaudited)

Six months

Ended

June, 30

2017

Six months

Ended

June, 30

2016

Cash Flows from Operating Activities

Net income (loss) for the period

$

1,431,443

$

829,207

Adjustments to reconcile net loss to net cash used in operating activities:

Reclassification of derivative liability upon Repayment of convertible debt

$

—

$

48,523

Common stock issued for conversion of notes and interest payable

$

—

$

24,732

Change in fair value for available for sale marketable securities

$

—

$

(1,860

)

5

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

June 30, 2017 and December 31, 2016

Note A - Background and Description of Business

Petrogress, Inc. (the “Company” or “Petrogress”) was incorporated on February 10, 2010 under the Laws of the State of Florida as 800 Commerce, Inc. (800 Commerce) and was formed for the purpose of marketing credit card processing services on behalf of merchant payment processing service providers.

On February 29, 2016, 800 Commerce entered into a Securities Exchange Agreement (the “SEA”) with an unrelated third party, Petrogres Co. Limited (“Petrogres”), a Marshall Islands corporation, and its sole shareholder. The Company acquired 100% of Petrogres and its affiliated companies. As consideration for the acquisition of Petrogres, the Company issued 136,000,000 shares of its restricted, unregistered common stock, representing approximately 85% of the post- transaction issued and outstanding shares of the Company’s common stock.

On March 9, 2016, the Company’s Board of Directors approved an amendment to the Company’s Articles of Incorporation to change the Company’s name to Petrogress, Inc.

On November 16, 2016, the Company filed Articles of Merger and Plan of Merger with the State of Florida and the State of Delaware to change the Company’s domicile from Florida to Delaware by means of a merger with and into a Delaware corporation formed solely for the purpose of effecting the reincorporation. The Articles of Incorporation and Bylaws of the Delaware corporation are the Articles of Incorporation and Bylaws of the surviving corporation. Such Articles of Incorporation maintained the Company’s corporate name of Petrogress, Inc. and modified the Company’s capital structure to allow for the issuance of up to 490,000,000 shares of $0.001 par value common stock and up to 10,000,000 shares of $0.001 par value preferred stock. The effect of this action is reflected in the accompanying financial statements as of the first day of the first period presented.

The acquisition of Petrogres, by the Company on February 29, 2016 effected a change in control and was accounted for as a ”reverse acquisition” whereby Petrogres was the accounting acquiror for financial statement purposes. Accordingly, the historical financial statements of the Company are those of Petrogres and its subsidiaries from their respective inception and those of the consolidated entity subsequent to the February 29,2016 transaction date.

Petrogress operates as a fully integrated international merchant of petroleum products, focused on the supply and trade of light petroleum fuel oil (LPFO), refined oil products and other petrochemical products to local refineries in West Africa and Mediterranean countries. The Company operates primarily as a holding company and provides its services through three wholly-owned subsidiaries: Petrogres Co. Limited, which provides management of crude oil purchases and sales; Petronav Carriers LLC, which manages day-to-day operations of its beneficially-owned affiliated tanker fleet currently consisting of four vessels; and Petrogress Oil & Gas Energy Inc., which is primarily focused on purchasing interests in oil fields in Texas and exporting liquefied natural gas. The Company’s management team operates from its principal offices located in Piraeus, Greece.

Note B - Preparation of Financial Statements

The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles and has elected a year-end of December 31.

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 as amended (the “Securities Act”) for complying with new or revised accounting standards. As an emerging growth company, we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

6

Note B - Preparation of Financial Statements - Continued

For segment reporting purposes, the Company and its subsidiaries operated in only one industry segment during the periods represented in the accompanying financial statements and makes all operating decisions and allocates resources based on the best benefit to the Company as a whole.

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements filed with the U. S. Securities and Exchange Commission on its Annual Report on Form 10-K for the year ended December 31, 2016. The information presented within these interim financial statements may not include all disclosures required by accounting principles generally accepted in the United States of America and the users of financial information provided for interim periods should refer to the annual financial information and footnotes when reviewing the interim financial results presented herein.

In the opinion of management, the accompanying interim financial statements, prepared in accordance with the U. S. Securities and Exchange Commission’s instructions for Form 10-Q, are unaudited and contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the respective interim periods presented. The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full fiscal year ending December 31, 2017.

The accompanying consolidated financial statements, as of and for the periods ended June 30, 2017 and 2016, respectively and as appropriate, contain the accounts of the Company and its wholly-owned subsidiaries: Petrogres Co Ltd., Petronav LLC, Shiba Ship Management Ltd., Danae Marine Ltd., Invictus Marine S. A. and Entus Marine Ltd. (all incorporated in the Republic of the Marshall Islands) and Petrogress Oil & Gas, Inc. (a State of Texas corporation). All significant intercompany transactions have been eliminated. The consolidated entities are collectively referred to as “Company”.

Note C - Summary of Significant Accounting Policies

1.

Cash and cash equivalents

The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.

2.

Accounts receivable and revenue recognition

The Company, through its subsidiaries, is primarily engaged in the purchase, transport and processing of oil and petroleum products. In the normal course of business, the Company extends unsecured credit to virtually all of its customers which are located principally in Africa. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. Because of the credit risk involved, management has provided an allowance for doubtful accounts which reflects its opinion of amounts which will eventually become uncollectible. In the event of complete non-performance, the maximum exposure to the Company is the recorded amount of trade accounts receivable shown on the balance sheet at the date of non- performance.

The Company recognizes revenues after product is delivered to a contracted customer. Product in transit at the end of an accounting period is recorded at an estimated value which is adjusted upon load certification. The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition. ASC 605 requires that the following four basic criteria are met (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured. The Company recognizes revenue from commissions during the month in which commissions are earned.

3.

Inventory

The Company's inventory, which consists primarily of purchased crude oil in transit on a marine vessel at the respective balance sheet date, is valued at the lower of cost or market using the mark-to-market method of valuation.

7

Note C - Summary of Significant Accounting Policies - Continued

4.

Marketable Securities

The Company classifies its marketable securities as available-for-sale securities, which are carried at their fair value based on the quoted market prices of the securities with unrealized gains and losses, net of deferred income taxes, reported as accumulated other comprehensive income (loss), a separate component of stockholders’ equity. Realized gains and losses on available-for-sale securities are included in net earnings in the period earned or incurred.

Other investments, if any, that do not have a readily determinable fair value are recorded at amortized cost. For purposes of computing realized gains and losses, the specific identification method is used.

5.

Property and equipment

Property and equipment are recorded at historical cost. These costs are depreciated over the estimated useful lives of the individual assets using the straight-line method, generally 5 to 10 years.

Gains and losses from disposition of property and equipment are recognized as incurred and are included in operations.

In accordance with the appropriate sections of the Fixed Asset topic of the FASB ASC, the Company follows the policy of evaluating all property and equipment as of the end of each reporting quarter. At June 30, 2017 and 2016, respectively, management has not provided any impairment for the future recoverability of these assets.

6.

Organization costs

The Company has adopted the provisions of provisions required by the Start-Up Activities topic of the FASB ASC whereby all costs incurred with the incorporation and reorganization of the Company were charged to operations as incurred.

7.

Income taxes

The Company files income tax returns in various jurisdictions, as appropriate and required. The Company is no longer subject to U.S. federal, state and local, as applicable, income tax examinations by regulatory taxing authorities for any period prior to January 1, 2012.

The Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. The Company recognizes deferred tax assets and liabilities to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. The Company records a valuation allowance related to a deferred tax asset when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. The Company classifies interest and penalties as a component of interest and other expenses. To date, the Company has not incurred any liability for unrecognized tax benefits, including assessments of penalties and/or interest.

The Company measures and records uncertain tax positions by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized.

8

Note C - Summary of Significant Accounting Policies - Continued

8.

Income (Loss) per share

Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.

Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.

As of June 30, 2017, the Company does not have any outstanding items which could be deemed to be dilutive. As of June 30, 2016, the Company had potentially dilutive securities related to the Company’s outstanding convertible debt that could have potentially converted into approximately 6,018,760 shares of common stock.

9.

Accounting for Stock-based Compensation

The Company accounts for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete. Stock awards granted to non-employees are valued at their respective measurement dates based on the trading price of the Company’s common stock and recognized as expense during the period in which services are provided.

11.

Comprehensive Income

The Company has adopted ASC Topic 220, "Comprehensive Income." This statement establishes standards for reporting comprehensive income and its components in a financial statement. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Items included in the Company’s comprehensive loss consist of unrealized losses on available-for-sale securities.

12.

New and Pending Accounting Pronouncements

The Company is of the opinion that any and all other pending accounting pronouncements, either in the adoption phase or not yet required to be adopted, will not have a significant impact on the Company's financial position or results of operations.

Note D - Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade accounts receivables. The Company places its temporary cash investments with financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the short payment terms dictated by the industry and operating environment. As of June 30, 2017 and December 31, 2016, management is of the opinion that the Company had no significant concentrations of credit risk.

The carrying amount of cash, accounts receivable, inventory, accounts payable and accrued expenses, and convertible debt, as applicable, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.

9

Note E - Fair Value of Financial Instruments - Continued

Marketable securities are adjusted to fair value each balance sheet date, based on quoted prices; which are considered level 1 inputs. The Company’s derivative liability is valued using the level 3 inputs. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.

Interest rate risk is the risk that the Company’s earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.

Financial risk is the risk that the Company’s earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to financial risk, if any.

Fair value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”). Fair value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market approach”). The Company also considers the impact of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity to identify transactions that are not orderly.

The highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The three hierarchy levels are defined as follows:

Level 1 - Quoted prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 - Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly;

Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s own credit risk as observed in the credit default swap market.

The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016, respectively, for each fair value hierarchy level:

Derivative

Marketable

June 30, 2017

Liability

Securities

Total

Level I

$

—

$

20,940

$

20,940

Level II

$

—

$

—

$

—

Level III

$

—

$

—

$

—

December 31, 2016

Level I

$

—

$

20,940

$

20,940

Level II

$

—

$

—

$

—

Level III

$

65,499

$

—

$

65,499

10

Note F - Property and Equipment

Property and equipment consist of the following components:

June 30,

December 31,

Estimated

2017

2016

useful life

Marine vessels

$

10,171,930

$

9,999,380

10 years

Furniture and equipment

116,808

89,328

5-10 years

10,288,738

10,088,708

Accumulated depreciation

(4,518,671

)

(4,169,641

)

Net property and equipment

$

5,770,067

$

5,919,067

Total depreciation expense charged to operations for the six month periods ended June 30, 2017 and 2016, respectively, was approximately $348,930 and $334,877. Total depreciation expense for the year ended December 31, 2016 was approximately $676,328.

Note G - Income Taxes

The components of income tax (benefit) expense for the each of the six month periods ended June 30, 2017 and 2016, respectively, are as follows:

Six months

ended

June 30,

2017

Six months

ended

June 30,

2016

Federal:

Domestic – current

$

—

$

—

Foreign – current

—

34,700

Deferred

—

—

—

34,700

State:

Current

—

—

Deferred

—

34,700

Total

$

—

$

34,700

Note H - Convertible Notes Payable

On May 1, 2015, the Company entered into a Convertible Promissory Note with LG Capital Funding LLC in the amount of $21,500 and on May 26, 2015, entered into a Convertible Promissory Note with Crown Bridge Partners LLC in the amount of $24,000. On December 9, 2015, both of these notes were acquired by Mammoth Corporation and restructured to the principal amount of $31,259 and $38,280, respectively. The notes had a scheduled maturity of September 9, 2016.

Each note was non-interest bearing and contained a conversion feature, at the option of the holder, whereby the principal amount and any accrued interest, if any, could be converted to common stock of the Company at a conversion price of 54% of the lowest closing price for the Company’s common stock during the 20 trading days preceding the date of the conversion notice.

The Company tendered a cash payment of approximately $44,887 as payment in full on the outstanding principal and accrued interest, if any, on July 3, 2017. Given the timing of this debt retirement in relation to the date of the accompanying financial statements, the retirement of the underlying derivative is effectively retired as of June 30, 2017.

11

Note H - Convertible Notes Payable - Continued

The Company determined that the conversion feature of the Mammoth Notes represent an embedded derivative since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the Mammoth Notes were not considered to be conventional debt under EITF 00-19 and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments being recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to each Note. Such discount is being amortized from the date of issuance to the maturity dates of the Notes. The change in the fair value of the liability for derivative contracts are recorded in other income or expenses in the consolidated statements of operations at the end of each quarter, with the offset to the derivative liability on the balance sheet. The embedded feature included in the Mammoth Notes resulted in a debt discount of $48,975 on the date the Mammoth Notes were assumed and a derivative liability of $300,321.

A summary of the derivative liability of the Mammoth Notes as of June 30, 2017 and December 31, 2016, is as follows:

June 30, 2017

Balance assumed

$

300,321

Reduction for conversion in prior periods

(82,652

)

Fair value changes over time

(152,170

)

Cancellation due to debt retirement in cash

(65,499

)

Balance at June 30, 2017

$

—

December 31, 2016

Balance assumed

$

300,321

Reduction for conversion in prior periods

(82,652

)

Fair value changes over time

(152,170

)

Balance at December 31, 2016

$

65,499

The fair value at the assumption and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of June 30, 2017 and December 31, 2o16, respectively:

June 30, 2017

Assumption date

Remeasurement date

Expected dividends

$

-0-

$

-0-

Expected volatility

363

%

366

%

Expected term in months

6

3

Risk yield

0.49

%

0.28

%

December 31, 2016

Expected dividends

$

-0-

$

-0-

Expected volatility

363

%

366

%

Expected term in months

6

3

Risk yield

0.49

%

0.28

%

A summary of the convertible notes payable balance as of June 30, 2017 and December 31, 2016 is as follows:

Assumed balance

$

69,619

Conversion of debt in March and April 2016

(24,732

)

Balance at December 31, 2016

44,887

Activity through June 30, 2017

-0-

Balance at June 30, 2017

44,887

Payment in cash on July 3, 2017

(44,887

)

Balance at July 3, 2017

$

-0-

Note I - Note Payable to Stockholder

In conjunction with the aforementioned change-in-control transaction on February 29, 2016, the Company and its current controlling stockholder, Christos Traios, recognized that sufficient working capital would be required for the foreseeable future to support the operations of the parent holding company, including the maintenance of the corporate entity and compliance with the periodic reporting requirements of the Securities Exchange Act of 1934, as amended.

12

Note I - Note Payable to Stockholder - Continued

For the period February 29, 2016 through July 13, 2017, this arrangement was undocumented and informal. On July 13, 2017 (Closing Date), the Company issued a $1,000,000 Revolving Line of Credit Note (LOC Note) in favor of the Company’s principal stockholder and sole officer/director, Christos Traios (Holder). As previously mentioned, Mr. Traios and the Company have agreed that additional working capital will be required by the Company to support the day-to-day operations of Petrogress Incorporated, the consolidated group’s parent and holding company and this note codifies the existence of that previously informal relationship.

The LOC Note bears interest payable on the outstanding principal from accrue from the Closing Date at eight percent (8%) per annum and will be computed for actual days elapsed on the basis of a 360 day year. The principal and any accrued but unpaid interest on this Note (collectively, the “Principal”) is due and payable on or before July 13, 2018 (Maturity Date). At the Maturity Date, provided that Borrower is not in default under this Agreement or the Promissory Note, the Company, at the Company’s option may extend and renew the LOC Note for additional terms of twelve (12) months, with a new Effective Date and Maturity Date assigned for each successive extension and renewal.

Interest shall be due and payable every six (6) months, with payments due on the first business day six (6) months following the Effective Date (the “Interest Due Date”) and on the Maturity Date, and each successive iteration of such dates upon extension and renewal thereafter for so long as this Agreement shall remain in effect.

The Principal amount of this Note may be prepaid by the Company, in whole or in part, without penalty, at any time. Upon any prepayment of a portion of this LOC Note, a new LOC Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Company to the Holder for the principal balance of this Note which shall not have been paid.

Upon the Interest Due Date or Maturity Date, or any of them, regardless of any Event of Default, as defined, the Lender may demand payment of any or all of the interest due on the principal amount by delivery of a number of common shares converted at a rate of $0.001 per share. There is no provision for any of the Principal to be repaid in common stock of the Company. Except in the Event of a Default (as defined), in no instance shall the Lender convert amounts due for accrued interest to the extent that said repayment in common stock will cause the Company to issue a number of shares constituting ten percent (10%) or more of the Company’s then issued and outstanding common shares.

In consideration of Lender's extending the Credit Line to the Company, the Company agreed to issue to Lender a Warrant (the "Warrant") to purchase 15,000,000 shares of the Company’s common stock at an exercise price of $0.05 for a period of five years. The Warrant will provide for cashless exercise privileges, and be transferrable or assignable at the Holder’s option, with the Company’s approval.

Activity on the LOC Note, including activity from inception, is as follows:

Balance at February 29, 2016

$

—

Net changes during the period

134,600

Balance at December 31, 2016

134,600

Net changes during the period

236,945

Balance at June 30, 2017

$

371,545

Note J - Common Stock Transactions

On November 16, 2016, the Company filed Articles of Merger and Plan of Merger with the State of Florida and the State of Delaware to change the Company’s domicile from Florida to Delaware by means of a merger with and into a Delaware corporation formed solely for the purpose of effecting the reincorporation. The Articles of Incorporation and Bylaws of the Delaware corporation are the Articles of Incorporation and Bylaws of the surviving corporation. Such Articles of Incorporation maintained the Company’s corporate name of Petrogress, Inc. and modified the Company’s capital structure to allow for the issuance of up to 490,000,000 shares of $0.001 par value common stock and up to 10,000,000 shares of $0.001 par value preferred stock. The effect of this action is reflected in the accompanying financial statements as of the first day of the first period presented.

Effective February 29, 2016, the Company issued 1,101,642 shares of the Company’s common stock to Agritek Holdings, Inc. pursuant to a Debt Settlement Agreement in full settlement of the amount owed to Agritek of $283,547.

13

Note J - Common Stock Transactions - Continued

Upon completion of the SEA between the Company and Petrogres, the Company issued to the sole Petrogres shareholder 136,000,000 shares of common stock of the Company in exchange for one hundred percent (100%) of the issued and outstanding share capital of Petrogres from the sole shareholder of Petrogres.

On March 7, 2016, the Company issued 1,000,000 shares of common stock to Mammoth upon the conversion of $2,700 of principal at a conversion price of $0.0027 per share.

On April 11, 2016, the Company issued 6,800,000 shares of common stock to Mammoth upon the conversion of $22,032 of principal at a conversion price of $0.00324 per share.

Note K - Preferred Stock

The Company is authorized to issue up to 10,000,000 shares of preferred stock, $0.001 par value. As of June 30, 2017 and December 31, 2016, respectively, there are no shares of preferred stock issued and outstanding.

On July 14, 2017,the Company’s Board of Directors approved a resolution authorizing the establishment of Series A Preferred Stock. The Series A Preferred Stock shall consist of 100 shares in total with a redesignated par value of $100.00 per share. The Holder(s) of the Series A share shall as a class have rights in all matters requiring shareholder approval to a number of votes equal to two (2) times the sum of: (I) the total number of shares of common stock which are issued and outstanding at the time of any election or vote by the shareholders; plus (ii) the number of shares of Preferred Stock issued and outstanding of any other class that has voting rights, if any. These voting rights may, if required, extend to a number of votes in excess of the total number of shares authorized. The Holder(s) of the Series A share shall not be entitled to convert the Series A share to shares of Common Stock or any other class of the Corporation’s stock and the Holder(s) of the Series A shares shall not be entitled to dividends. In the event of liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the Holder(s) of the Series A share will be entitled to receive out of the assets of the Corporation, prior to and in preference to any distribution of the assets or surplus funds of the Corporation to the holders of any other class of preferred stock or the Common Stock, the amount of One Hundred Dollars ($100.00) per share, and will not be entitled to receive any portion of the remaining assets of the Corporation except by reason of ownership of shares of any other class of the Corporation’s stock. The Series A shares shall not be subject to redemption by the Corporation.

Note L - Common Stock Warrants

The Company has issued an aggregate 15,000,000 warrants to purchase an equivalent number of shares of common stock at a price of $0.05 per share as a component of the July 13, 2017 Revolving Line of Credit Agreement by and between the Company and Christos Traios, the Company’s Chief Executive Officer.

Number of

Warrant

Shares

Weighted

Average

Price

Balance at January 1, 2017

—

$

0.00

Issued

—

Exercised

—

Cancelled

—

Balance at June 30, 2017

—

$

0.00

Issued on July 13,2017 as a component of the Revolving Line of Credit Agreement with stockholder

15,000,000

$

0.05

Exercised

—

Expired

—

—

Balance at July 13, 2017

15,000,000

$

0.05

Note L - Common Stock Warrants - Continued

As of July 13, 2017, the warrants break down as follows:

# warrants

exercise price

15,000,000

$0.05

15,000,000

$0.05

# warrants

expiring in

15,000,000

2022

Note M - Officer Compensation

On April 1, 2016, the Company entered into an Employment Agreement (Employment Agreement) between Christos P. Traios, an individual residing in Piraeus - Greece (Executive) and the Company.

The Company has agreed to employ the Executive to perform managerial and executive functions for the Company and the Executive has agreed to perform such services for the Company on the terms and conditions defined in the Employment Agreement, subject to the directives of the Company’s Board of Directors. The term of this Employment Agreement commenced on April 1, 2016 and terminates on March 31, 2021, provided, however, that the Employment Agreement shall automatically renew on a year-to-year basis unless terminated by either party via written notice at least four (4) months prior written notice during any given year, unless terminated as provided for in the Employment Agreement.

The Executive is entitled to receive:

(a) - During the Term of Employment, the Company shall pay the Executive a salary at an annual rate of U.S. $120,000.00 (One Hundred Twenty Thousand) U. S. Dollars (Base Salary). The Base Salary will be payable in monthly installments of $10,000 (Ten Thousand) U. S. Dollars on the 1st day of each calendar month, commencing on the starting date of the Agreement;

(b) - In addition to his Base Salary, the Company shall issue to the Executive shares of Preferred stock with super-voting rights, which he shall hold until the parties, either of them, terminate this Agreement;

(c) - The Executive will also be given an expense allowance of $5,000 (Five Thousand) U. S. Dollars per month, subject to the Company receiving supporting receipts and other required documentation for any such expenses on a monthly basis. Any expenses in excess of that amount will require the prior approval of the Company’s Board of Directors;

(d) - The Executive shall also be eligible to participate in any future bonus, profit sharing and/or ESOP plans approved and enacted by the Company’s Board of Directors on the same basis with all other senior executives of the Company, subject to the terms thereof. The Executive understands, however, that no such plans are currently in effect or anticipated.

The Executive is also entitled to receive any other normal and ordinary benefits offered by the Company on a basis equal to any other senior executive(s) of the Company.

The Agreement may be terminated as follows: (a) at any time by the mutual written consent of the Executive and the Company; (b) at any time for cause (as defined in the Employment Agreement) by the Company upon written notice to the Executive; (c) upon the Executive’s death or upon the Executive’s permanent disability (as defined in the Employment Agreement) continuing for a period of ninety (90) days; (d) at any time by the Executive with sixty (60) days written notice of intent to terminate to the Company; or (e) at any time without cause (as defined in the Employment Agreement) by the Company upon written notice to the Executive of not less than thirty (30) days, subject to the caveats that the Company will pay the Executive the Executive’s Base Salary for a period of six (6) months as severance pay and shall pay any unpaid bonus and benefits in each case through the effective date of termination.

During the six months ended June 30, 2017 and the year ended December 31, 2016, the Company paid or accrued approximately $60,000 and $100,000 pursuant to this Employment Agreement.

14

Note N - Rental Commitments

The Company leases office and other facilities benefitting the Company on long-term operating leases, as follows:

Office space in Piraeus, Greece for monthly rent of €2,500 (approximately $2,942 USD at August 1, 2017). The lease, as amended, expires on May 31, 2018. The Company believes that this office space is adequate for its operations at the present time.

Effective June 13, 2016, the Company entered into a thirteen (13) month lease for a corporate apartment in New York City, to be used by the Company’s CEO during his travel to New York. Mr. Traios spends approximately 35% of his time in New York on business matters. The monthly rental is for $4,100 through July 12, 2018.

Effective October 1, 2016, the Company entered into a one year Office Services Agreement for office space and other services for a total base monthly fee of $2,800. The Company utilizes the New York office space for administrative purposes.

Future minimum rental payments on the above leases are as follows:

Year ended

December 31,

Amount

2017

$

84,750

2018

$

13,375

Totals

$

98,125

For the six months ended June 30, 2017 and the year ended December 31, 2016, respectively, the Company paid an aggregate of $ 62,200 and $88,181.3 for rent under these agreements.

Note O - Related Party Transactions

The Company has accounts receivable from affiliated entities of approximately $475,632 and $-0- at June 30, 2017 and December 31, 2016, respectively.

Note P - Revenue Concentrations

The Company sells to commercial customers in foreign markets. The following table shows the Company’s gross revenue composition:

Foreign Commercial

Six months

ended

Jun. 30, 2017

Six months

ended

Jun. 30, 2016

Six months

ended

Dec. 31, 2016

Accounts Receivable

Balance at

Jun. 30, 2017

A

52.10

%

—

—

$

2,059,439

B

11.40

%

28.50

%

25.40

%

685,264

C

—

33.90

%

20.10

%

93,980

D

—

11.80

%

21.60

%

280,875

E

—

10.70

%

—

80,000

F

—

10.20

%

13.70

%

121,000

63.50

%

95.10

%

80.80

%

3,320,558

Others

36.50

%

4.90

%

19.20

%

608,633

Totals

100.00

%

100.0

%

100.0

%

$

3,929,191

Note Q - Subsequent Events

Management has evaluated all other activity of the Company through the issue date of the financial statements and concluded that, except as disclosed in the appropriate notes listed above, no other subsequent events have occurred that would require recognition in the accompanying financial statements or disclosure in the Notes to Consolidated Financial Statements as of the date of this filing.

All statements in this Quarterly Report on Form 10-Q that are not representations of historical fact are “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. The disclosure and analysis set forth in this Quarterly Report on Form 10-Q includes assumptions, expectations, projections, intentions and beliefs about future events in a number of places, particularly in relation to our operations, cash flows, financial position, plans, strategies, business prospects, changes and trends in our business and the markets in which we operate. These statements are intended as forward-looking statements. In some cases, predictive, future-tense or forward-looking words such as “believe,” “intend,” “anticipate,” “estimate,” “project,” “forecast,” “plan,” “potential,” “may,” “should” and “expect” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.

There are a variety of factors, many of which are beyond our control, which affect our operations, performance, business strategy and results and could cause actual reported results and performance to differ materially from the performance and expectations expressed in these forward-looking statements. These factors include, but are not limited to, such matters as:

•

future operating or financial results and future revenues and expenses;

•

future, pending or recent business and vessel acquisitions, business strategy, areas of possible expansion and expected capital spending and our ability to fund such expenditure;

•

operating expenses including the availability of key employees, crew, length and number of off-hire days, dry-docking requirements and fuel and insurance costs;

our financial condition and liquidity, including our ability to make required payments under our credit facilities, comply with our loan covenants and obtain additional financing in the future to fund capital expenditures, acquisitions and other corporate activities;

•

the overall health and condition of the U.S. and global financial markets, including the value of the U.S. dollar relative to other currencies;

•

the carrying value of our vessels and the potential for any asset impairments;

•

our expectations about the time that it may take to construct and deliver new vessels or the useful lives of our vessels;

•

our continued ability to enter into period time charters with our customers and secure profitable employment for our vessels in the spot market;

•

the ability and willingness of our counterparties, including our charterers and shipyards, to honor their contractual obligations;

•

fluctuation of currency exchange and interest rates;

•

our ability to leverage to our advantage the relationships and reputation of the various operating subsidiaries of Petrogress, Inc. within the shipping industry;

•

our anticipated general and administrative expenses;

•

environmental and regulatory conditions, including changes in laws and regulations or actions taken by regulatory authorities;

•

risks inherent in vessel operation, including terrorism, piracy and discharge of pollutants;

•

potential liability from future litigation;

•

global and regional political conditions;

•

tanker, product carrier and LNG carrier supply and demand; and

•

other factors discussed in the “Risk Factors” described in our most recently filed Form 10-K.

We caution that the forward-looking statements included in this Quarterly Report on Form 10-Q represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and are not intended to give any assurance as to future results. These forward-looking statements are not statements of historical fact and represent only our management’s belief as of the date hereof, and involve risks and uncertainties that could cause actual results to differ materially and inversely from expectations expressed in or indicated by the forward-looking statements. Assumptions, expectations, projections, intentions and beliefs about future events may, and often do, vary from actual results and these differences can be material. As a result, the forward-looking events discussed in this Quarterly Report on Form 10-Q might not occur and our actual results may differ materially from those anticipated in the forward-looking statements. Accordingly, you should not unduly rely on any forward-looking statements.

We undertake no obligation to update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q , whether as a result of new information, future events, a change in our views or expectations or otherwise. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

(2)

General

Petrogress, Inc. (the “Company” or “Petrogress”) was incorporated on February 10, 2010 under the Laws of the State of Florida as 800 Commerce, Inc. (800 Commerce) and was formed for the purpose of marketing credit card processing services on behalf of merchant payment processing service providers.

16

On February 29, 2016, 800 Commerce entered into a Securities Exchange Agreement (the “SEA”) with an unrelated third party, Petrogres Co. Limited (“Petrogres”), a Marshall Islands corporation, and its sole shareholder. The Company acquired 100% of Petrogres and its affiliated companies. As consideration for the acquisition of Petrogres, the Company issued 136,000,000 shares of its restricted, unregistered common stock, representing approximately 85% of the post- transaction issued and outstanding shares of the Company’s common stock.

The acquisition of Petrogres, on February 29, 2016, by the Company effected a change in control and was accounted for as a ”reverse acquisition” whereby Petrogres was the accounting acquiror for financial statement purposes. Accordingly, the historical financial statements of the Company are those of Petrogres and its subsidiaries from their respective inception and those of the consolidated entity subsequent to the February 29,2016 transaction date.

On March 9, 2016, the Company’s Board of Directors approved an amendment to the Company’s Articles of Incorporation to change the Company’s name to Petrogress, Inc.

On November 16, 2016, the Company filed Articles of Merger and Plan of Merger with the State of Florida and the State of Delaware to change the Company’s domicile from Florida to Delaware by means of a merger with and into a Delaware corporation formed solely for the purpose of effecting the reincorporation. The Articles of Incorporation and Bylaws of the Delaware corporation are the Articles of Incorporation and Bylaws of the surviving corporation. Such Articles of Incorporation maintained the Company’s corporate name of Petrogress, Inc. and modified the Company’s capital structure to allow for the issuance of up to 490,000,000 shares of $0.001 par value common stock and up to 10,000,000 shares of $0.001 par value preferred stock. The effect of this action is reflected in the accompanying financial statements as of the first day of the first period presented.

Petrogress operates as an fully integrated international merchant of petroleum products, focused on the supply and trade of light petroleum fuel oil (LPFO), refined oil products and other petrochemical products to local refineries in West Africa and Mediterranean countries. The Company operates primarily as a holding company (see Note B to the Financial Statements) and provides its services through three wholly-owned subsidiaries: Petrogres Co. Limited, which provides management of crude oil purchases and sales; Petronav Carriers LLC, which manages day-to-day operations of its beneficially-owned affiliated tanker fleet currently consisting of four vessels; and Petrogress Oil & Gas Energy Inc., which is primarily focused on purchasing interests in oil fields in Texas and exporting liquefied natural gas. The Company’s management team operates from its principal offices located in Piraeus, Greece.

The Company’s Texas operations are in the start-up phase and no significant management time or working capital has been expended towards these efforts.

(3)

Results of Operations

Revenues

The Company has recognized net sales of petroleum products for the six months ended June 30, 2017 and 2016 and for the year ended December 31, 2016, as follows:

Six months

Ended

June 30,

2017

Six months

Ended

June 30,

2016

Year

Ended

December 31,

2016

Crude oil gross sales

$

5,515,285

$

4,807,452

$

9,226,800

Gas oil gross sales

570,000

5,627,000

7,697,600

Hires-Freights & Others

2,376,900

712,220

1,150,927

Totals

$

8,462,185

$

11,146,672

$

18,075,327

Management believes that the sales trends for the remainder of Calendar 2017 will trend comparably when compared to our results for the first six months of 2017 and the year ended December 31, 2016.

Cost of Sales

Directly related to our sales activity and volumes, we experienced the following cost of sales amounts for the six months ended June 30, 2017 and 2016 and for the year ended December 31, 2016, as follows:

Six months

Ended

June 30,

2017

Six months

Ended

June 30,

2016

Year

Ended

December 31,

2016

Oil purchase costs

$

2,835,027

$

5,824,824

$

9,349,388

Shipping & Vessels OPEX

1,253,829

2,023,177

2,986,388

Other

—

80,171

161,353

Totals

$

4,088,856

$

7,937,172

$

12,497,214

Gross profit percentage

51.68

%

28.79

%

30.86

%

The Company’s cost of sales is dependent on the market price of petroleum products, both at the time of purchase and at the time of sale.

17

Operating expenses

Total operating expenses for the six months ended June 30, 2017 and 2016 were $3,009,648 and $2,425,479 inclusive of depreciation of approximately$348,930 and $334,877 respectively, an increase of approximately $584,169 or approximately 24.08%. This change in operating expenses is primarily due to increased of the administrative, legal, accounting expenses in US.

The Company may or may not experience increases in expenses in future periods as the Company explores various options for the operation and expansion of its business plan.

The Company experienced net income of approximately $1,431,443 and $829,207 for each of the six months ended June 30, 2017, respectively.

Earnings per share for the respective six month periods ended June 30, 2017 and 2016 were $(0.00) and $(0.00), respectively, based on the weighted-average shares issued and outstanding at the end of each respective period.

Petrogres Co. Limited, a Marshall Islands corporation (“Petrogres”), was incorporated in 2009 with the purpose of supplying crude oil and other oil products in West Africa.

Since its inception, Petrogres has evolved its business from focusing solely on fleet and tanker ship operations to expand into the oil and gas industry as a trader and merchant of oil. Over the last five years, Petrogres has strengthened its position in the oil and gas industry by combining its regional market knowledge with over 25 years of experience to successfully establish both its midstream and downstream operations to serve markets primarily located in West Africa and the Mediterranean.

In November 2016, Petrogres entered into an alliance agreement with Prometheus Maritime Ltd., a Nigerian corporation (“PML”), a crude oil and gas trading company (the “Alliance Agreement”). Pursuant to the terms of the Alliance Agreement, Petrogres and PML agreed to cooperate towards a petroleum project in Nigeria , including the supply and transportation of oil commodities to various end-buyers throughout West Africa (the “Nigeria Petroleum Project”), with Petrogres acting as the lead party.

Petronav Carriers LLC, a Delaware corporation (“Petronav”), was formed in March 2016 with the purpose of managing the day-to-day operations of its four vessels, which are used to transport the Company’s petroleum products within various countries in West Africa. Petronav is currently exploring opportunities to expand its operations by identifying and acquiring additional vessels to expand its tanker fleet under management.

In December 2016, Petronav executed a non-binding memorandum of understanding (the “MOU”) with West Africa Fenders Ltd., a Nigerian company that provides ship-to-ship services to the oil and shipping industries (“WA Fenders”). The MOU contemplates that Petronav may purchase a 25% interest in the capital of WA Fenders, subject to execution of definitive agreements and customary closing conditions. As of the date of this quarterly report, this transaction has not closed and management believes to remain viable.

In May 2017, the company entered into a sale agreement with Sage Petroleum Ltd., a company who supplies oil directly to Ghana National Power Plant, to deliver them 40,000 barrels (5% +/-) every month for the next 12 months with a scale discount of the dated ICE Brent price.

Petrogress Oil & Gas Energy Inc., a State of Texas corporation (“Petrogress Energy”), was incorporated in December 2015 and is focused on identifying and acquiring suitable interests in oil fields in Texas to allow for the Company’s expansion of its operations to include oil refinery production based within the United States and to export liquefied natural gas (“LNG”) to Mediterranean markets. Limited management time, effort and working capital has been expended in developing this entity’s business plan.

Our business structure affords us with full control of the logistics involved in oil sourcing and the transportation of our products by our affiliated vessels, which we believe to be a competitive advantage in West African markets. By directly controlling all aspects of our operations, as opposed to engaging the services of third-parties at potentially higher costs, we are able to keep costs low and thus generate revenue from a number of different sources.

18

(5)

Liquidity and Capital Resources

At June 30, 2017 and 2016 and December 31, 2016, respectively, the Company had cash and cash equivalents of approximately $831,211, and $362,000 with corresponding working capital of approximately $4,955,465 and $3,441,023.

It is the belief of management that the Company’s operations will provide sufficient working capital necessary to support and preserve the integrity of the corporate entity.

The Company's need for working capital may change dramatically as a result of any business acquisition or combination transaction. There can be no assurance that the Company will identify any such business, product, technology or company suitable for acquisition in the future. Further, there can be no assurance that the Company would be successful in consummating any acquisition on favorable terms or that it will be able to profitably manage the business, product, technology or company it acquires.

The Company has no current plans, proposals, arrangements or understandings with respect to the sale or issuance of additional securities related to the expansion of its operations or business plan. The issuance of additional securities may be used in any future, if any, acquisition transaction(s).

Regardless of whether the Company’s cash assets prove to be adequate to meet the Company’s operational needs, the Company might seek to compensate providers of services by issuances of stock in lieu of cash.

(6)

Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note C of our accompanying consolidated financial statements. While all of these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.

19

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

Not required of a smaller reporting company.

Item 4 - Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive and Chief Financial Officers (Certifying Officers), have evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 promulgated under the Exchange Act as of the end of the period covered by this Quarterly Report. Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our Certifying Officers, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our Certifying Officers have concluded that as of such date, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the time periods specified by the SEC due to a inherent weakness in our internal controls over financial reporting due to our status as a shell corporation and having a sole supervising officer. However, our Certifying Officers believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the respective periods presented.

(b)

Changes in Internal Controls

There were no other significant changes (including other corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the quarter ended June 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

20

Part II - Other Information

Item 1 - Legal Proceedings

From time to time, we may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although, to date, there have been no such proceedings, we do not anticipate that any future proceedings, either individually or in the aggregate, will become material to our business or be likely to result in a material adverse effect on our future operating results, financial condition, or cash flows.

Item 1A – Risk Factors

We are a smaller reporting company as defined by Reg. 240.12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Petrogress, Inc.

Dated: August 11, 2017

By: Christos Traios

Christos Traios

Chief Executive Officer and Financial Officer

22

Exhibit 31.1

Certification

I, Christos Traios, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Petrogress, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August 11, 2017

By: Christos Traios

Christos Traios

Chief Executive Officer and Financial Officer

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Petrogress, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christos Traios, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 11, 2017

By: Christos Traios

Christos Traios

Chief Executive Officer and Financial Officer

A signed original of this written statement required by Section 906 has been provided to Petrogress, Inc. and will be retained by Petrogress, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certificate is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as a part of the Report or as a separate disclosure document.